5 Merit Budget Stats to Share with Your CFO

It’s a crucial time of year for compensation leaders when it comes to budgeting. As the year comes to a close, we wanted to look at some key data points related to merit cycle budget increases and how companies approach them. 

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We looked at Pave’s dataset to analyze 2024 data, and we also conducted a survey of Total Rewards leaders to get a pulse on 2025 projections. Taken together, this market data paints a picture of a compensation landscape that is relatively consistent and in line with expectations.

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Need some data points to help you make informed decisions around 2025 merit cycle planning and bolster communications with your finance team? Here are five key merit increase stats to share with your CFO.

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1. The Median Salary Budget Increase was 4.5% in 2024

First things first: let’s explore overall salary budgets, including merit increases, promotions, and market adjustments. When it comes to increasing the overall salary budget across all employees, the median increase among companies in Pave’s dataset was 4.5%.

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If this feels pretty standard, that’s because it is. This number is tracking pretty similarly to previous years, and we are not seeing major changes.

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“It may not be splashy news, but in this case, steady and normal is good,” said Katie Aldred, Consulting Partnerships Lead at Pave. “It shows us that things are relatively stable.”

2. Similar Salary Budget Increases Are Planned for 2025

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Staying on the topic of the overall salary budget, we also wanted to look ahead at what’s to come next year. In our survey of ~100 Total Rewards leaders at large tech companies, we asked about their merit cycle budget plans for 2025 (US only).

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This sample of compensation leaders plan to have:

• Median overall budget increase: 5.0%
  • Median promotion budget increase: 1.0%
  • Median merit budget increase: 3.5%

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As we can see, the 5.0% planned budget is a slight increase on the actual 4.5% median increase we saw for 2024 (the larger sample size in the 2024 data is likely contributing to the difference). We would expect this trend to continue. 

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The other point to note is that where companies have separate budgets in place, they’re carving out 3.5% for merit increases and 1% for promotions. While some companies opt to break out these budgets separately, some companies just have one overall budget for salary increases.  

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Companies that have separate budgets for merit increases, promotion increases, and so on might do so for more granularity, more information for the HRBPs, or to help with tracking and reporting. Companies that have a single budget for all salary increases usually do so to simplify things for the end users, to give more discretion when it comes to paying out their employees, or to allow for greater flexibility.

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3. ~15% of Employees Were Promoted This Year

According to Pave data, 14.9% of all employees were promoted in 2024—and this trend from 2024 looks poised to continue next year. Survey respondents also said they plan to have a median overall promotion rate of 15.0% in 2025.

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Looking even deeper into Pave data, we also find that employees at lower levels have higher promotion rates.

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Of employees who were promoted in 2024, the median salary increase was 10.5%.

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“One of the critical things when it comes to awarding a promotion increase is that it should be meaningful,” Katie said. “Your promoted employees should feel as though they are being rewarded, and getting more of an increase than the majority of your employees. That said, comp leaders are being asked to do more with less, so rewarding high performers can be difficult in this environment.”

4. The Majority of Employees Received a Raise

A median 69% of employees received a raise across all companies in Pave’s dataset. This means ~30% of employees received neither a pay raise or a promotion. 

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There are a number of reasons for this. New hires might not be eligible for a merit increase, some employees may be poor performers and not earn merit increases, or companies might be going through a pay freeze and not give pay raises. Still, this number is in line with expectations.

5. The Median Raise for Non-promoted Employees was 4%

Among employees who received a raise but not a promotion, the median salary increase was 4%. Once again, this number aligns with expectations.

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While the median raise is 4%, what’s interesting to consider from company to company is how organizations grant raises on either side of the median. For example, are they using the peanut butter approach and giving 4% raises across the board? Or are they implementing a pay-for-performance strategy that rewards high performers with higher raises, and gives low performers less? 

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‍Pay for performance can be a valuable tool for compensation leaders as they consider how they will allocate their 2025 merit budget.

Full 2024 Merit Budget Results Are Coming Soon

We’ve only scratched the surface on the merit budget stats from Pave’s dataset. Stay tuned for a refreshed analysis to include full year 2024 results. 

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In the meantime, download our Merit Cycle State of the Union to dive deeper into this topic.

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